You must have seen this before: “Buy this car and pay only $500 monthly installment. As a bonus, we will waive the first installment for you!”. This marketing message of only spending $500 for your car has been drilled deep into people. When I hear friends discussing the purchase of a car, the conversation centers around the affordability of that monthly installment. If they can pay this payment: “No problem! We will buy the car!”.

Here is a real look at the true cost of car ownership, not only in terms of real monetary cost but to the cost to your early retirement plan.

Monetary cost

Car ownership is super expensive in Singapore due to the COE and the high import tax. Let’s assume we buy a family sedan that is around SGD100k. What is the cost of that?

• Price: SGD100,000
• Interest on car loan: SGD20,000 assuming a 7 year loan, 6% interest and a loan amount of SGD90,000
• Insurance: SGD10,000 for 10 years
• Road tax: SGD7500 for 10 years
• Maintenance: SGD6,000 for 10 years assuming 4 checks per year and each check costing your SGD150.
• Major repairs: SGD10,000 for 10 years. This covers things such as changing of tyres, brakes etc.
• Parking: SGD18,000 assuming SGD100 per month HDB parking for 10 years and SGD50 per month for other parking

Total cost of car ownership is about SGD172,000. This is for a family sedan car. Anything above this class will require a much higher budget.

An interesting point to note is that the non purchase price of the car is about 70% of the buying price. I bet the salesman didn’t tell you this!

While the above is interesting, let me share the opportunity cost which can really open your eyes to what the true cost is.

Opportunity cost

Assuming that instead of buying the car, we are going to put the SGD1433  (172k/120) into an investment instrucment that gives us 4%. That will gives us SGD211,000 in 10 years. That is not a bad sum but let’s say after 10 year, we continue with the investment. This will gives us SGD700 per month of passive income. If you are able to cut your spending to SGD1500 per month, SGD700 can go a long way to help you to retire early.

What is the real cost of car ownership

Leaving the numbers aside, let’s look at the real cost of car ownership.

It is sacarificing your most precious resource, time for something that can be easily do without, especially in a country like Singapore. The cost of owning a car is spending less time to do the things you want to do. You can’t retire early and therefore you can’t

• spend more time with your parents who might be old and needing your company for comfort
• spend more time with your kids who needs your attention now more than a comfortable ride
• enjoy the little things in lives such as reading a book that only comes with having more time
• and more.

As I said before, retiring early is more than having enough money. It is a mind set shift away from consumerism to things that you really care about. Car is a particularly lethal financial poison that leads you away from financial freedom. We are not living in the US for god’s sake. Public transport in Singapore is like a dream. Learn to use it and you realise you need not work to your 60s to begin to enjoy life.